ClassNK

By Greg Trauthwein, Editor

Monday, March 18, 2013

Noboru Ueda & ClassNK Push Ahead in the United States

There has been a decided uptick in activities from Japan’s ClassNK in the last 18 months, as it continues to drive its world-leading tonnage numbers ever higher. Led by Chairman and President Noboru Ueda, ClassNK has been making moves to extend its influence globally, including a big push for growth in the U.S. Maritime Reporter & Engineering News was able to visit with Mr. Ueda to discuss the society’s strategy going forward.

We have watched with great interest the activities of ClassNK over the past year, as it has expanded its reach into the U.S. further and continued to pass world record milestone after milestone in terms of tonnage under class. In your words, what has been the impetus for this growth in the previous 12 months?

In 2012, nearly 1000 vessels and more than 25 million gross tons joined the ClassNK register. Even with scrapping at an all-time high, the NK register grew by a net total of more than 16 million gross tons in 2012, a new record. Last year was without a doubt an incredible success for our society. I think that underlying that growth has been a few factors. One, we are 100% dedicated to the maritime industry. 66% of our staff are maritime surveyors, and 70% of our staff are either naval architects or mechanical engineers. At the same time, all of our R&D budget, which amounted to nearly $60m in 2012, goes entirely to maritime related research, with the vast amount to joint research with companies from throughout the industry.
Two, ClassNK is not a business; we are a non-profit service organization dedicated to supporting the maritime industry. We don’t view ourselves as a being a certification business, but rather an organization dedicated to supporting the maritime industry. Our clients trust us because they know we are independent and motivated by safety, not making profits. These factors, combined with our commitment to service and technical excellence, are I think the main reasons for our success over the years, and I believe they will continue to be the source of our success in the years to come.

ClassNK is truly a global classification society with deep roots in the traditional, bluewater markets. But how does that expertise and experience translate to business opportunities in the domestic, U.S. inland trades and how will you reach those customers?

ClassNK has been active in the U.S. since opening our New York office in 1962. Over the past 50 years, we’ve built incredibly strong relationships with many American shipowners, especially in the dry bulk sector, some of which span generations. Today, we are not only the world’s largest class society, we also classify some 35% of the world’s bulk carriers, and so ships classed with NK already carry a large part of America’s grain and coal exports. As you likely know, some 60% of America’s grain and 20% of its coal are already transported on river barges, so we are familiar with the industry, and with the expansion of the Panama Canal we expect that America’s brown water industry will have an even brighter future ahead of it.
As transporting cargo by barge is also incredibly environmentally efficient, producing just 1/15 of the emissions of rail freight, and 1/60th of commercial trucks. Brown water shipping is an industry that we whole-heartedly support.

Earlier this month, ClassNK received expanded authorization(s) from the U.S. Coast Guard. With the new inland subM rules looming on the horizon, what will be your approach to penetrating that market?

We actually started discussing the new regulations proposed by the USCG with some brown water owners as early as 2009, and at their request, we began looking at how we could best support the brown water industry as the rules enter effect. While we are just now in the process of expanding our operations to deal with this demand, we realize that one very key area is going to be price. We think that safety management, like many other kinds of certification, can ultimately help reduce costs for owners and operators, but implementation does present a cost to owners. However, we hope that by offering our services in the brown water sector, we can help reduce those costs for everyone in the industry.
In a sense, ClassNK is very much like Toyota in that we have a very lean operation that is focused on providing high quality service. For example all of our surveyors are not only trained to conduct ship surveyors but also ISM, ISPS, and MLC audits. We also train all of our surveyors from around the world extensively in Japan for several months when they are hired and several times over the course of their career to ensure they can carry out their work efficiently and with the highest quality possible. Our goal is to provide world-class quality at a reasonable price.
Equally, just by participating in the market, we can offer owners a greater range of choices, and via competition keep prices down for the entire industry. If our presence can help reduce the burden of compliance on the industry, than we consider that a success.

As you know, on the U.S. shallow draft market, the Subchapter M rules are coming and while most stakeholders have a fair idea of what the final rules will entail, no one can know for sure right now. How do you tailor a solution package in advance of that? Can anyone?

As I mentioned, the brown water industry is incredibly important, not just to American shipping, but to the entire global maritime industry, and we expect it to become even more important in the future. In line with that importance, we are seeing an increased emphasis on professionalization, as well as reducing the human causes of accidents. This is already something we have addressed on the blue water side of the industry with the implementation of the International Safety Management (ISM) code. At ClassNK we not only contributed to the development of the ISM, we are also the world leader in ISM registration and audits. Each year we audit more than 5000 blue water vessels to the ISM Code, far more than any other class society, and we have an unmatched experience with safety management systems. It’s that experience and understanding that we hope to offer to owners and operators on America’s rivers.
ClassNK’s physical footprint in the Americas is growing but will need to ramp up to meet new business requirements – additional USCG authorizations and subchapter M. How will you do that and to whom can you look for help?

Since first starting to discuss the new brown water regulations with tug and barge owners in 2009, we’ve steadily increased our resources in the U.S. and with the authorization we have received from the USCG, we can now begin to fully expand our operations to better serve the industry. We are already examining sites for new offices to better cover the Mississippi and other rivers, and hope to make some announcements regarding our expanded operations within the next month.

How has the recent global economic problems specifically impacted the business of ClassNK, and if you could, please put in perspective the scale and scope of this downturn versus downturns in previous years.

I have been in the maritime industry for more than 40 years now, and so I have seen downturns like this one before. One thing that makes this downturn particularly difficult is that even as the market has faltered, fuel prices have increased, and new regulations are putting even greater pressures on owners and operators.
While this poses its own difficulties, it has also inspired us an organization. Following the crash in 2008, we realized that high costs and low revenues, combined with the burden of new regulation would place a major toll on the industry, and Joint R&D for Industry program was started in 2009 as a response. Under this program we provide research funding and support to maritime organizations in order to develop new technologies and processes to improve efficiency and reduce costs at all stages of a ship’s life. The program has been so successful that it now accounts for more than half our R&D budget. If we can bridge the gap through technology and reduce costs for shipowners, yards and operators, we can help re-ignite growth in the industry, and that we that is an important goal.

As you reflect on the role of CLASS in general (not ClassNK specifically), there has been quite a transformation in the last decade, punctuated by the recent announcement of the merger of two major class societies. In your opinion, what do you consider to be the most positive changes in class in regards to the way in which it interacts with the industry?

I think the most important change has been the success of classification societies these past few years, with some classification societies expanding far beyond just maritime. Bureau Veritas for example has become a massive global organization, and maritime is one of its smaller business sectors. With the merger of DNV and GL, we are seeing the birth of another such organization. Their success and growth outside traditional ship classification is truly impressive.
For us at ClassNK, we are solely focused on the maritime industry, but we have also had enjoyed this success, becoming the first classification society in history to have more than 200 gross tons our register last year. Of course, the real beneficiary is the maritime industry. We are seeing an incredible number of new treaties and new regulations enter force, and it is classification societies that are developing the tools and technologies necessary to address these changes. We have grown to become organizations that can effectively answer the many technical challenges faced by the industry, and that is an incredible achievement.

We noted with interest of the world first “Ballast Water Management System in a Box” solution from MOL and Mitsubishi, which was classed by ClassNK. As you well know, shipowners in general feel overburdened with new rules and regulations regarding the manner in which they outfit their ship. From where you sit, as environmental regulation (and the related costs of doing business) continue to evolve, what effect(s) do you see it having on the marine industry as a whole?

As I mentioned above, while there are costs associated with new regulations, they can also provide owners with numerous benefits. This is especially true with regards to regulations related to improved efficiency, which given the high cost of fuel, can have major benefits for owners and operators. In fact, one reason we have been so aggressively promoting and research new green technology is because it allows owners to reduce fuel costs and comply with environmental regulations at the same time.
Even with environmental regulation however, we work very hard to keep costs for shipowners to a minimal. Our PrimeShip-GREEN/EEOI service, is a free web-based software tool for helping owners calculate and track their vessels efficiency and performance that is used by more than 1,500 ships.
Nevertheless, compliance with some new regulations such as the Ballast Water Management Convention do present significant costs to owners. In the case of the containerized Ballast Water Management System project,, which was carried out as part of the Joint R&D for Industry program, this technology helps reduce the time and engineering costs related to BWMS retrofits. Another key technology we have been looking at is the use of 3-D laser scanners to help speed the retrofit process. This is a technology that we helped introduce to the maritime industry via a pilot project with several Japanese stakeholders that is now becoming commonplace throughout the industry. In order to even further reduce the costs related to this technology, we are now also developing new software to more quickly and easily convert the data from 3-D scanners into CAD data usable by most maritime design software.